2002

Plains All American P ipe l ine, L.P.

Annua l Repor t

•Points of Di st inct ion

• returnTotal

In last year’s annual report, we focused on the concept of “growth + yield = total return” and

highlighted the positive attributes of Plains All American Pipeline’s strategic asset base and stable

cash flows in cyclical markets. These attributes proved important in 2002, as crude oil prices were

extremely volatile and the financial markets were influenced by economic uncertainty, concerns

over corporate accountability and the threat of war. As we proudly introduce our 2002 annual

report “Points of Distinction”, we are pleased to highlight PAA’s total return over the last two

years in comparison to our pipeline MLP peer group and major market indices.

PAAPlains All American Pipeline, L.P.

Plains All American Pipeline, L.P. (“PAA”) is a publicly traded master limited partnership (“MLP”) engaged in

interstate and intrastate transportation, terminalling and marketing of crude oil and marketing of liquefied petroleum

gas.We are one of the largest midstream crude oil companies in North America, handling over 1.4 million barrels

per day of physical crude oil through our extensive network of assets located in key producing basins and trans-

portation gateways in the United States and Canada. Our business is comprised of two operating segments:

(i) crude oil pipeline transportation operations and (ii) gathering, marketing, terminalling and storage operations.

As an MLP, we make quarterly distributions of our available cash to our Unitholders. Since our initial public offering

in 1998, we have increased our quarterly distribution by approximately 19 percent to its current level of $0.5375 per

unit, or $2.15 per unit on an annualized basis. It is our goal to increase our distribution to Unitholders over time

through a combination of internal and acquisition-oriented growth.

Our common units are traded on the New York Stock Exchange under the symbol “PAA.” We are headquartered

in Houston,Texas.

In this report, we use the term “EBITDA.” EBITDA means earnings before interest, income taxes, depreciation and amortization. EBITDA is not presented in accordancewith generally accepted accounting principles (GAAP) and is not intended to be used in lieu of GAAP presentations of results of operations or cash provided by operating activities. EBITDA is presented because we believe it provides additional information with respect to operating performance and our ability to meet ourfuture debt service, capital expenditures and working capital requirements, and is commonly used by our stakeholders to analyze partnership performance.

PAA 2002

01

One-Year Total Return

January 1, 2002 – December 31, 2002

Two-Year Annual iz ed Total Return

January 1, 2001 – December 31, 2002

PIPELINE MLP INDEX(1)

2.0%

(1.2%)

(15.0%)

(22.1%)

21.9%

17.1%

(10.3%)

(17.1%)

PAA DOW JONESINDUSTRIAL

AVERAGE

S&P 500 PAA PIPELINE MLP INDEX(2)

DOW JONESINDUSTRIAL

AVERAGE

S&P 500

(1) Includes BPL, EEP, EPD, EPN, KMP, KPP, NBP, TCLP, TPP, VLI and WEG. (2) Includes BPL, EEP, EPD, EPN, KMP, KPP, NBP, TCLP and TPP.

PAA 2002

02

Fe llow Unitholder s For Plains All American Pipeline, 2002 was a year of growth, strength and

notable accomplishments.What makes these results extraordinary is that they were achieved in an environment

plagued by economic uncertainty, stock market decline, corporate scandals, congressional investigations, financial

restatements, bankruptcies, rapid-fire credit downgrades and significant legislative and regulatory response.

By maintaining our financial discipline and making certain mid-course adjustments, we were able to successfully

navigate PAA through these numerous “mine fields.” As a result, we not only had a solid year in tumultuous times,

but the Partnership entered 2003 stronger than ever and well-positioned to continue its multi-year track record

of year-over-year improvement in financial and operating performance.

at the beg inning of 20 02 , we provided financial guidance for the year, established a goal of

completing approximately $300 million in acquisitions and, on that basis, set a target to achieve a year-over-year

increase in our distribution rate of approximately 10 percent.We also reiterated our commitment to maintain a

strong balance sheet and adhere closely to our targeted credit profile consisting of a debt-to-book capitalization ratio

of 60 percent or less, a debt-to-EBITDA ratio of 3.5x or less and an EBITDA-to-interest ratio of 3.3x or greater.

Despite turbulent conditions throughout the year, we achieved or exceeded all of these goals except one.

Our financial performance was within the range of the quarterly guidance we provided throughout the year as

the diverse, counter-cyclical and synergistic nature of our operations performed as designed.We also achieved our

acquisition objective as we completed a large, strategic and accretive acquisition from Shell Pipeline Company

along with a few smaller transactions from other sellers.

485$

mill ion in Ava ilable L iquid ity *Maintained Counter-Party

credit quality

over

•

resultsq 1 | q 2 | q 3 | q 4

F inancial

•

+Rece ived Credit Rat ings

• •upgrades

�5%•

PAA 2002

03

Despite making the second largest acquisition in the Partnership’s history during chaotic times in the capital markets,

we delivered on our commitment to maintain a strong balance sheet and a high level of liquidity.We accomplished

this by raising approximately $150 million of equity and $200 million in long-term debt capital during the latter

part of 2002.

Preserving this balance sheet strength and high level of liquidity was not without its consequences and was just one

of the mid-course adjustments we had to make during the year.After committing to acquire the Shell assets, the broad

equity market became soft and the weakness extended into the MLP sector.After carefully weighing the incremental

cost of issuing equity in a weak market against the benefits of maintaining a strong capital structure, we decided to

proceed with an equity offering and a subsequent senior notes offering.As a result of these actions, we are well within

our targeted credit metrics and have maintained outstanding liquidity. Moreover, we extended the average life of our

debt to 6.3 years, have no final debt maturities until 2005 and have locked-in attractive interest rates on a substantial

portion of our debt.

While these financing decisions strengthened the financial flexibility of the Partnership, they also impacted our cash

distribution capacity. During 2002, we raised our distribution level on two separate occasions by a total of $0.10 per

unit to $2.15 per unit on an annualized basis, or approximately 5 percent over the 2001 year-end level of $2.05 per

unit.While we believe distribution growth of 5 percent for a cash yielding security is a commendable achievement

in any market, much less the chaotic conditions of 2002, it was short of our original target to achieve 10 percent

year-over-year growth. Such shortfall is a partial consequence of the mid-course decisions we made with respect to

$1.8 b ill ion Enterpri se Value

•

30% Debt

70% Equity

Di stribut ion Growth

AcquisitionsAccret ive $340million

•

is based on our judgment and estimates of the performance of our current asset base.As a result, our growth in

distributions to Unitholders is expected to be in the range of 2–4 percent by the end of 2003, before considering

the effect of future acquisitions not included in our current targets.

We intend to continue to evaluate acquisition opportunities and have maintained a goal to make $200 million to

$300 million per year in strategic and accretive acquisitions. Incorporating meaningful acquisition activities into our

outlook for distribution growth, we foresee total distribution growth approaching 8 percent in 2003.Actual growth will

depend on a variety of factors, including timing of consummation of any meaningful acquisitions and the lag time

associated with realizing related synergies.

While we have positioned ourselves to capitalize on attractive growth opportunities, we will continue to exercise financial

discipline and place a high value on maintaining Plains All American’s strong capital structure and high level of liquidity.

We look forward to the opportunities and challenges of 2003 and beyond, and we encourage you to monitor our

progress and our results by visiting our web site at www.paalp.com where we post our press releases, investor

presentations, conference call transcripts, conference call notifications and participation instructions. On behalf of Plains

All American Pipeline and its 1,200 plus loyal and dedicated employees, we thank you for your continued support.

Sincerely,

PAA 2002

04

GREG L.ARMSTRONG HARRY N. PEFANIS

Chairman and Chief Executive Officer President and Chief Operating Officer

our financing activity. However, in light of the strategic and accretive nature of the Shell acquisition and the chaos

that plagued the industry and financial markets in 2002, we are pleased with our decision to acquire the Shell assets

and our refinancing decisions.

Ultimately, our financial discipline was rewarded, as Plains All American was one of a very limited number of energy

entities to receive positive ratings actions from both ratings agencies during 2002. Moreover, in February 2003, PAA

received an investment grade rating from Standard and Poor’s.To our knowledge, we are the only energy-related entity

to be upgraded by S&P from non-investment grade status to investment grade status since January 1, 2002, excluding

upgrades related to merger transactions.

Although we certainly would have preferred to achieve the full 10 percent distribution growth during 2002 and

thereby meet every single one of our goals for the year, we are very pleased with our overall operating performance

and enter 2003 with a strong balance sheet and excellent liquidity, and on track to begin realizing the synergies from

a very strategic and accretive acquisition.

outlook for the future With 2002 in our rearview mirror and our eyes squarely focused on the future,

we have once again set performance goals for the upcoming year. In February 2003, we raised our 2003 performance

targets from the preliminary levels we shared with the financial community last year.As a result, we are now targeting

year-over-year growth in EBITDA of over 20 percent.This incorporates a full-year contribution from the Shell assets

as well as several smaller acquisitions we have either closed or are pursuing as of early 2003, and the successful imple-

mentation of the suite of capital projects scheduled for the remainder of the year.This target is not without risk and

advantageour Compet it ive

Our Cushing Terminal i s one of the most modern, large-scale crude o il te rminall ing fac il it i e s in North America and i s de s igned to safe ly and e f f ic i ently te rminal, store,agg regate and seg regate large volume s and mult iple variet i e s of both fore ign and dome st ic crude o il.

•

Operat ions In the early 1990s, we recognized that fundamentals in the crude oil industry were foreshadowing

the need for increased movements of crude oil into the Midwestern region of the United States (also known as

PADD II). In 1993, in response to that need, we built the Cushing Terminal, our first major asset, which was strategically

located in Cushing, Oklahoma – the southern gateway for incremental pipeline movements to refining centers in the

Midwest. Our Cushing Terminal, which now stands at approximately 5.3 million barrels of capacity, serves as the

cornerstone of our business strategy that is designed to capitalize on logistical inefficiencies inherent in the North

American crude oil distribution system.

Plains All American Pipeline enters 2003 as one of the top midstream crude oil companies in North America, owning

over 5,600 miles of crude oil and condensate pipelines, approximately 22.7 million barrels of terminalling and storage

capacity and a full complement of truck transportation and injection assets. On average, we handle over 1.4 million

barrels per day of physical crude oil through our extensive network of assets located in major oil producing regions

of the United States and Canada.

We have deliberately configured our assets to provide a counter-cyclical balance between our gathering

and marketing activities and our terminalling and storage activities. By combining these balanced capa-

bilities with our relatively stable, fee-based pipeline assets, we strive to generate consistent earnings and

cash flow during all phases of the crude oil price cycle.We believe our ability to consistently generate

stable financial results in an industry that is highly cyclical differentiates us from our peers and offers

an excellent risk versus return proposition for our stakeholders.

Not only is our cash flow stream diversified with respect to business activities, but it is geographically diversified as well.

Our operations are conducted in approximately 40 U.S. states and three Canadian provinces. By applying our specialized

market knowledge to our extensive network of assets as well as third-party assets, we can exploit the numerous opportu-

nities to profit from the transportation of over 50 different grades and varieties of crude oil throughout North America.

Currently, domestic U.S. production supplies roughly 39 percent of the U.S. daily crude oil demand and our country

has become increasingly reliant on foreign imports and significant inland movements to supply the balance. Nowhere

has this been more prevalent than in PADD II, where regional production continues to steadily decline while refinery

demand remains stable to increasing.The resulting supply shortfall has progressively

increased.As a result, every day approximately 2.8 million barrels of crude oil has to

be transported into PADD II by pipeline, truck, rail and barge – a significant increase

from the approximately 0.6 million barrels per day brought in during 1984. As this

trend continues, incremental barrels will have to be moved into PADD II from either

the South, likely through Cushing, or the North from Canada. Our strategic position

in Cushing, where we own 5.3 million barrels of storage capacity and have significant

expansion capability, and our Canadian asset base, which substantially mirrors our

U.S. operations and is connected with the major outbound pipelines in Canada,

should allow us to benefit from movements from both the South and the North.

PAA 2002

06

52% PIPELINES

48% GATHERING,MARKETING,TERMINALLING AND STORAGE

•2003 PROJECTED EBITDA CONTRIBUTION (1)

4% CA – ONSHORE

41% 17% TEXASCA – OCS

15% OTHER

23% CANADA

•2003 PROJECTED EBITDA CONTRIBUTION BY GEOGRAPHY (1)

(1) Assumes projected 2003 EBITDA of $161.0 million, the midpoint of financial guidance furnished to the financial community on Form 8-K on February 26, 2003. Projected 2003 EBITDA is derived by adding back projected interest expense ($37.3 million) and depreciation and amortization ($44.6 million) to adjusted income ($79.1 million). Adjusted income excludes the impact of SFAS 133, which can only be determined on the last day of the reporting period.

�

MILLION BARRELS OF CRUDE OIL STORAGE CAPACITY

5,600 MILES OF CRUDE OIL ANDCONDENSATE PIPELINES

1.4 TRANSPORT, TERMINAL,GATHER AND MARKET

OVER

BARRELS PER DAYOF CRUDE OIL

22.7

THE SOUTHERN ROUTE TO PADD II

THE NORTHERN ROUTE TO PADD II / IV

Our Cushing Terminal is strategically located relative to increased Southern movements into PADD II.

• Capline is near capacity and is uneconomic to significantly expand.

• The existing pipeline infrastructure has made Cushing the natural route for incremental Southern barrels being moved into PADD II.

PAA 2002

07

V

IV

III

I

�

�

II

CANADA

PAA Terminals

PAA Owned Pipelines

Third Party Pipelines

Mill ion

Our Canadian and Rocky Mountain pipeline infrastructure is strategically located relative to Northern movements intoPADD II / IV.

• Canadian oil sands production projected to increase for next 5–10 years.

• PADD IV supply shortfall is growing.

NORTH AMERICAN CRUDE OIL MOVEMENTS

assets• our Strateg ically Located

CUSHING

•

CUSHING

1,200+strong

•

We are especially blessed to have over 1,200 outstanding employees in the United States

and Canada that support our management team. It is through their hard work and

dedication that we will continue to deliver superior service to our customers.

During 2002, we made several strategic additions to our asset base in order to broaden our operating capabilities

and strengthen our competitive positioning. On the internal growth side, we completed the Phase II and Phase III

expansions of our Cushing Terminal. Collectively, these projects increased the size of the facility by approximately

70 percent.This strategically located facility now consists of fourteen 100,000 barrel tanks, four 150,000 barrel tanks,

twelve 270,000 barrel tanks and a manifold and pumping system capable of handling up to 800,000 barrels of crude

oil throughput per day. It is designed to safely and efficiently terminal, store, aggregate and segregate large volumes and

multiple varieties of both foreign and domestic crude oil to meet the needs of refiners in the U.S. Midwest.As a result

of these expansion projects, we estimate that we now own approximately 20 percent of the storage capacity in Cushing.

Importantly, our tanks are the newest and most efficient in Cushing and we are well-positioned to continue to expand

our presence in response to growing demand for services or attrition of competing tanks.

On the acquisition growth side, we completed approximately $340 million of strategic and accretive acquisitions

during 2002, the highlight of which was our $324 million acquisition of West Texas pipeline assets from Shell Pipeline

Company in August.The assets acquired included the Basin Pipeline System, the Permian Basin Gathering System in

West Texas and the Rancho Pipeline System.These assets strengthen our position in the prolific West Texas crude oil

producing region, as well as provide access to foreign crude oil imports that can be shipped from the Gulf Coast on

connecting pipelines and then moved on the Basin system to Cushing.The Basin system also provides us with a

direct mainline transportation route between West Texas and our Cushing facility.

•

PRODUCERS REFINERS

TRUCK

PIPELINE GATHERING

BARGE

INJECTIONSTATION

TERMINAL / STORAGE / EXCHANGE LOCATION

PIPELINE

P L A I N S A L L A M E R I C A N O P E R AT I O N S

G AT H E R I N G, M A R K E T I N G, T E R M I N A L L I N G, S TO R AG E & P I P E L I N E S

our rolePAA 2002

09

PIPELINE

In 2003, we are poised to begin realizing meaningful synergies from the integration of the Shell assets.We expect to

be able to increase cash flow from these assets by (i) lowering operating expenses due to field synergies, (ii) increasing

throughput as volumes shift from the Rancho Pipeline (which we shut down on March 1, 2003) to other pipelines

in West Texas and (iii) incorporating excess tankage into our commercial strategies designed to maintain the counter-

cyclical balance of our business activities.

Integration synergies are also producing opportunities to lower operating expenses, which are expected to yield cost

savings of approximately $3.1 million per year beginning in 2003.With respect to increasing throughput, we have com-

pleted an inspection of the Basin system that confirmed the integrity of the system and we confirmed that the pipeline

capacity can be increased (should market conditions warrant) by as much as 90,000 barrels per day over historical levels

with the use of drag reducing agents.The Rancho Pipeline System Agreement dated November 1, 1951, pursuant to

which the system was constructed and operated, terminated in March 2003. Upon termination, the agreement required

the owners to take the pipeline system out of service. As a result of the Rancho system being shut down, we expect to

see increased volumes on the Basin system, as it is one of only a few alternative transportation routes available to move

the displaced crude oil out of West Texas.This is a net positive for us, as we own a larger stake in the Basin system,

which also has a higher margin realization than the Rancho system.

With the shut down of the Rancho system, we have also positioned ourselves to increase our physical flexibility

to move crude oil into the Basin system and into excess tankage.We are making modifications that permit certain

segments of our Permian Basin Gathering System to be bi-directional. In addition, we have connected, or are in

PAA 2002

10

the process of connecting, an additional 40,000–45,000 barrels per day of crude oil to our Permian Basin system,

which barrels in turn become candidates for movement on the Basin system.The new connections include a rather

significant extension of the system to the north and, in at least one instance, a reserve dedication from a producer.

We expect the extension to be completed in July 2003.

The third avenue for achieving cash flow growth from the Shell assets involves the integration of excess tankage into

our commercial strategies.The physical changes we are making to the system will facilitate these activities and we

anticipate these tanks will be fully integrated into our commercial strategies by the end of 2004.

In addition to the Shell acquisition, we made several other small acquisitions in 2002 and we have already made two

small acquisitions in early 2003.These incremental “bolt-on” acquisitions enable us to realize additional synergies with

our existing operations while enhancing the services we can offer to our customers and allow us to employ incremental

capital at attractive rates of return.We fully intend to continue this pattern of making larger strategic acquisitions in

core operating areas and then “bolting on” smaller complementary acquisitions. Collectively, we have a goal of making

$200–300 million per year of strategic and accretive acquisitions.

We believe that these internal and acquisition growth opportunities coupled with the continued execution of our busi-

ness strategy and maintaining our strong financial position will allow Plains All American Pipeline to ultimately achieve

our vision of becoming the premier crude oil transportation and marketing company in North America by providing

the utmost in value-added services to our customers, and in doing so, delivering superior returns to our stakeholders.

Director s of Pla ins All American GP LLC

The General Partner of Plains AAP, L.P.,The General Partner of Plains All AmericanPipeline, L.P.

Greg L. ArmstrongChairman of the Board and Chief Executive OfficerPlains All American GP LLC

Everardo GoyanesPresident and Chief Executive OfficerLiberty Energy Holdings

Gary R. PetersenManaging DirectorEnCap Investments L.L.C.

John T. RaymondPresident and Chief Executive OfficerPlains Resources Inc.

Robert V. SinnottSenior Managing DirectorKayne Anderson Capital Advisors, L.P.

Arthur L. SmithChairman and Chief Executive OfficerJohn S. Herold, Inc.

J.Taft SymondsChairmanMaurice Pincoffs Company, Inc.

Senior Management Team of Pla ins All American GP LLC

The General Partner of Plains AAP, L.P.,The General Partner of Plains All AmericanPipeline, L.P.

Greg L. ArmstrongChairman of the Board and Chief Executive Officer

Harry N. PefanisPresident and Chief Operating Officer

Phillip D. KramerExecutive Vice President and Chief Financial Officer

George R. CoinerSenior Vice President

Jim G. HesterVice President – Acquisitions

Alfred A. LindsethVice President – Administration

Tim MooreVice President, General Counsel and Secretary

Mark F. ShiresVice President – Operations

Troy ValenzuelaVice President – Environmental, Health and Safety

A. Patrick DiamondManager – Special Projects

Lawrence DreyfussAssociate General Counsel and Assistant Secretary

Al SwansonTreasurer

Canadian Management Team

Dave DuckettExecutive Vice PresidentPMC (Nova Scotia) Company

Mark AleniusVice President and Chief Financial OfficerPMC (Nova Scotia) Company

Ralph CrossVice President – Business DevelopmentPMC (Nova Scotia) Company

John KersVice President – OperationsPMC (Nova Scotia) Company

Unitholder Informat ionThe common units, excluding the Class B common units, are listed

and traded on the New York Stock Exchange under the symbol “PAA”.

The following table sets forth the high and low sales prices for

the common units as reported on the New York Stock Exchange

Composite Tape for the period indicated:

2002 High 2002 Low 2001 High 2001 Low

1st Quarter $ 26.79 $ 23.60 $ 23.63 $ 19.06

2nd Quarter $ 27.30 $ 24.60 $ 28.00 $ 22.15

3rd Quarter $ 26.38 $ 19.54 $ 29.65 $ 23.10

4th Quarter $ 24.44 $ 22.04 $ 28.00 $ 24.35

Transfe r AgentAmerican Stock Transfer & Trust

59 Maiden Lane

New York, New York 10038-4502

800.937.5449

Form 10-KA copy of the Partnership’s annual report on Form 10-K to

the Securities and Exchange Commission for the year ended

December 31, 2002, is available free of charge on request to:

Investor Relations

Plains All American GP LLC

333 Clay Street, Suite 1600

Houston,Texas 77002-4101

713.646.4491 / 800.564.3036

Independent AccountantsPricewaterhouseCoopers LLP

1201 Louisiana Street, Suite 2900

Houston,Texas 77002-5607

Executive Office of the General PartnerPlains All American GP LLC

333 Clay Street, Suite 1600

Houston,Texas 77002-4101

713.646.4100 / 800.564.3036

Fax: 713.646.4572

E-mail: info@paalp.com

Web site: www.paalp.com

• •

•

•

informationPartner sh ip

333 Clay Stre et, Su ite 16 0 0Houston, Texas 770 02

www.paalp.com

Pla ins All American P ipe l ine, L.P.